Scaling Up - The Barriers

Chapter 2: The Barriers.

There are roughly 28 million companies in the United States (US), of which only 4% ever reach more than $1 million in annual revenue. Of those companies only about 1 in 10 (0.4%) ever make it to the $10 million in annual revenues mark; and only 17,000 companies in the US, have surpassed 50 million thresholds.

According to Verne and his team, handling a company’s growth successfully requires 3 things: An increasing number of capable leaders, a scalable infrastructure, and an effective marketing function. If any one of these 3 factors is missing, your company will likely face considerable barriers to growth.

Unfortunately for many business leaders, scaling up their business is a nightmare. Does every employee you hire, every customer you acquire, and every expansion you drive actually make you tired? Are you working longer hours, although you thought there would be some economies of scale as the business grew? Does it feel like everyone is just piling onto an increasingly heavier anchor that you alone are dragging through the sand? This isn’t what you signed up for. It is supposed to get easier as you scale right. So what happened?

If you are like me and have gone through this stage in your business cycle, you are experiencing what Verne and Company refer to as the “Growth Paradox.” The Growth Paradox is the belief that as you scale your company and improve your dream team, prospects, and resources, things should get easier—but unfortunately they don’t. It seems all you are striving for seems to get harder and more complicated as you try to grow.

So how to you counter the Growth Paradox?

According to Verne and this team, you have to conquer complexity. Complexity generates 3 fundamental barriers to scaling up a company:

Leadership: the inability to hire enough leaders throughout the organization who have the capabilities to delegate and predict.

Scalable infrastructure: the lack of systems and structures (physical and organizational) to handle the complexities of communication and decision making which come with growth.

Marketing: the failure to scale up an effective marketing function to both attract new relationships ( customer, talent, etc.) to the business, and address the increased competitive pressures ( and eroded margins) as you scale.

To deal with these challenges, the company must grow the capabilities of the leadership team throughout the organization, install scalable infrastructure to manage the increasing complexities that come with growth, and also, stay on top of the market dynamics that affect the business. To do this, there are ‘4 Decisions’ that leaders must address: People, Strategy, Execution and Cash. The principles outlined in Scaling up.